Networked Guild Finance (NGF)

This Entry has been submitted.

Networked Guild Finance (NGF)

South Africa
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

A networked funding of local guilds via conditional cash transfers. Guild members are updated regarding fellow members payment status via text messages. All members receive payments simultaneously based on a guild credit rating. First and last members to repay loans are touted to encourage positive peer pressure.

About Project

Solution: What is the proposed solution? Please be specific!

NGF is unique in that it applies niche funding on a large scale through diverse economies using technology and human nature to leverage economies of scale in financing small businesses. NGF incorporates age old social relationship models in the form of professional guilds and introduces the speed of mobile telecommunications in conjunction with SME finance. NGF creates a solid infrastructure to deal with the treble challenge of poor credit ratings, risk diversification and local business knowledge. NGF attains this by packing similar risk lenders into a guild, providing positive incentives in the form of access to capital and reduced interest rates while simultaneously safeguarding the lenders capital by collective pressure on non performance in the form of conditional cash transfers which are suspended collectively in the case of defaults. Technology is harnessed to maintain up to the second communication with all guild members regarding payments, defaults and adjusted interest rates. Guilds can be created according to prevailing local conditions regarding industry types but can also be created to match government growth plans in targeted industries or regions.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

The social impact is relative to the number of businesses that form effective guilds. This will supply much needed job creation due to industry growth and will catalyze poverty reduction in the region.
About You
Organization:
MaAfrika Tikkun
Visit website
About You
First Name

Jarred

Last Name

Myers

Your Organization

MaAfrika Tikkun

Country

, GT

About Your Organization
Organization Name

MaAfrika Tikkun

Organization Phone

+27 11 325 591

Organization Address

57 6th Rd Hyde Park JHB SA

Organization Country

, GT

Organization Type

Non-profit/NGO/Citizen-sector Organization

The information you provide here will be used to fill in any parts of your profile that have been left blank, such as interests, organization information, and website. No contact information will be made public. Please uncheck here if you do not want this to happen..

Your solution
Country your work focuses on
If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:

Africa, Latin America and the Caribbean, Middle East and North Africa, South Asia.

Range of turnover in your target firms, in USD

Less than $1 Million.

Average turnover in USD of your target firm

250000

Number of employees in your target firms

5-24.

Average number of employees of your target firm

10

Specify the size, average and range of expected loans or investments in each target firm

Size $20,000-50,000
Average $25,000
Range $20,000-50,000

What stage is your solution in?

Idea phase

Innovation
How does your proposed innovation leverage public intervention in catalyzing private SME finance?

Governments create growth targets with specific micro and macro economic variables in mind. NGF allows for the governments to target specific industries by providing guild funding. Governments also encourage guilds to be formed where they do not exist in order to take advantage of preferential access to capital at below market rates.
This public intervention allows SME’s to catalyze their growth by providing easier access to expansion capital.

What barriers does your proposed solution address?

Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, High transaction costs for financial intermediaries to serve SMEs, Lack of competition / incentives for financial intermediaries to serve SMEs, Underdeveloped local capital markets (term local currency funding, exit options for SME equity), General barriers to SME development related to investment climate, Specific barriers to fragile and weak states.

If you checked any of these barriers, describe how your solution addresses them

The major barrier which NGF targets is lack of collateral since as individual businesses they would have difficulty in attracting investment and in obtaining debt finance but though the guild collective they are able to leverage their sizes as well as create hubs of specialization.NGF targets lack of SME skills and markets by creating these hubs which will foster an environment of skills transfer.NGF reduces transaction costs by providing a single credit rating to the entire guild. NGF supports underdeveloped capital markets in that it allows for businesses that would not normally attract debt funding to be attractive as a bulk finance recipient.NGF tackles general barriers to SME development by creating guilds that are mutually benefitted by each other’s success since this results in lower debt funding opportunities as well as cross polinization and synergies associated with industry hubs as can be found in Silicon Valley , London’s financial district and Wall Street

Impact
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

NGF is in the conceptual stage

How many firms do you expect to reach?

10,000

What is the volume of private SME finance you aim to catalyze?

$250M

What time frame will be required to reach these targets?

5 Years

Does your solution seek to have an impact on public policy?

What would prevent your solution from being a success?

Approximately 250 words left (2000 characters).

Sustainability
List all the funding sources that are required for the sustainability of this solution

Commercial Banking sources with partial government debt underwriting.

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

As credit default risk narrows commercial banks will underwrite these NGF guilds in their own merit based on their successful track records and not based on government risk mitigation.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

Alternate commercial banks will be incentivized by local and national governments to step in to manage the NGF portfolio’s

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

Government and local banks as well as development funding agencies would need to collaborate in the initial phases to adequately capitalize the process.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

Political instability
Credit liquidity crisis
Natural disasters

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

NGF is applicable across industries and sectors and can be scaled vertically and or horizontally based on local conditions present.